Figuring athletes’ taxes is, well, taxing

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“In some states, like if we play in California four times in a certain season, it gets pretty complicated, from what I understand,” said Red Sox second baseman Dustin Pedroia.

By Callum Borchers
Globe Staff
March 22, 2013

Crunch time. A sprint to the finish. Game on. Accountants use all kinds of sports metaphors to describe tax season, but a few CPAs are closer to real-life fields, courts, and rinks than the rest.

Professional athletes have some of the most complicated tax bills in the country, and they generally don’t file via TurboTax or at the local H&R Block. More often, they recruit from the small roster of accountants­ who specialize in preparing returns for athletes.

“A lot of people can probably muddle their way through it, but it takes a specialist to know all the right questions to ask,” said Mitchell S. Halpern, director­ of the sports and entertainment accounting services practice at O’Connor & Drew in Braintree. “I’ve seen a lot of returns prepared by people who don’t specialize in athletes that missed some opportunities.”

The complicating factor for pro athletes is not how much they earn — though they often make millions of dollars per year — but where they earn it. With few exceptions, athletes owe income taxes in every state where they play.

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Red Sox players, for example, will take the field in 14 states and the Canadian province of Ontario this season. Eleven of those jurisdictions tax income earned within their borders. In addition, several cities where the team will play road games — Detroit, Kansas City, Philadelphia, and Cleveland — levy separate­ income taxes.

Including his federal obligation and any taxes owed to his home state, a Sox player might expect to pay 17 tax bills.

“Our accountant handles all of that, but my poor wife ends up signing everything, and it takes her forever,” said Red Sox second baseman Dustin Pedroia. “In some states, like if we play in California four times in a certain season, it gets pretty complicated, from what I understand.”

JOHN TLUMACKI/GLOBE STAFF; GLOBE FILE

Mitchell Halpern is one of a handful of accountants who specialize in preparing taxes for professional athletes.

With average salaries of $3.2 million in the four major sports, pro athletes are not likely to attract much sympathy for their tax headaches. But they are unquestionably singled out.

The State of Louisiana — a popular destination for sporting events, such as the most recent Super Bowl in New Orleans — has created a unique tax form exclusively for nonresident professional ­athletes.

For years, California — home of 15 pro teams in football, baseball, basketball, and hockey — had assigned one staff member at the Franchise Tax Board to monitor athletes full time. (The staff member recently retired, and athlete-tracking duties are now shared, said Denise Azimi, a board spokeswoman.) The board estimated that California collected $171.7 million in taxes from visiting athletes in 2010, the last year for which figures are available.

In Massachusetts, an out-of-state executive paid by her company to visit Boston for a client meeting or a conference would not owe taxes here on the wages she earned during the business trip, according to the Department of Revenue. Yet every NBA player who steps on the parquet floor at TD Garden must contribute to the Bay State’s coffers.

There are circumstances in which people in other professions are expected to pay taxes on money earned during visits to Massachusetts. But for the tax collectors, pro athletes make unusually big — and easy — targets.

“There was a time when athletes didn’t make that much money, but now that they’re making so much, states are aggressively going after their taxes because it’s not an insignificant amount that they can collect from a few individuals,” said Jerome R. Glickman, a principal at the Philadelphia accounting firm Shechtman Marks Devor. “Plus, athletes’ work schedules are so public that it’s pretty easy to figure out what they owe.”

Almost every state with a major league franchise has a law that requires visiting pro athletes to pay taxes on the income they earn there. Most, including Massachusetts, calculate an athlete’s taxable income by measuring the number of “duty days” spent in the state. A duty day is any day on which an athlete is required to participate in team activities, from the first preseason training session to the final post-season game.

‘I had one client who was so pleased that he invited me to dinner with a bunch of his teammates.’

For example: A Celtics player who compiles 200 duty days in a season and spends 20 of those days in California would be taxed in the Golden State on a tenth of his team wages.

Slight variations from state to state make accounting work tricky. Teams do their best to withhold players’ taxes, but how can the New England Patriots figure out what Tom Brady owes to New York when writing his game check after a November contest in Buffalo without knowing how many duty days he will rack up during a playoff run two months later?

“Teams rarely have it close to right,” said K. Sean Packard, tax director at OFS Wealth in McLean, Va.

Even after accountants make sense of athlete clients’ taxes, their work is often not finished. Pro athletes are audited frequently, most likely because they claim unusual deductions, like payments to personal trainers and masseuses, said Brad Gastineau, tax manager at Gatto, Pope & Walwick in San Diego.

For an all-star accountant able to handle the pressure of keeping world-class athletes tax-compliant, the trophy is steady business.

“I had one client who was so pleased that he invited me to dinner with a bunch of his teammates, and I got some new business that way,” said Halpern, who handles taxes for 30 to 40 athletes each year. “I ended up with like nine Patriots.”

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